India Inc turns to contract labour

The recent workers' strike at the Hero Honda plant at Gurgaon near Delhi revealed India Inc's worst kept secret: its growing dependence on contract labour.

While around 1,600 Hero Honda employees were working in the factory, the company was using the services of no less than 2,000 contract workers.

In the past, contract workers were used in seasonal industries like sugar where permanent employment cannot be provided for the whole year to all workers. Now, the practice has spread to other sectors like automobiles, paper and cement.

Neither the government nor the national labour unions have any estimate of their numbers. And corporations are not willing talk about it - queries sent to a dozen companies remained unanswered. But there are indications that the numbers could be large.

GS Thakur, labour commissioner, Gurgaon district, said, "As many as 50 per cent of the workforce in Gurgaon could be workers employed by contractors."

"The Uttar Pradesh government in 1982 had issued an order banning the use of contract workers in the textile and engineering industries. A stay was obtained on this order and the practice of using contract workers in these sectors continues," HL Kumar, senior advocate, Supreme Court, said.

Under law, companies are allowed to employ contract labour for peripheral work like gardening and transportation; for work that is permanent and perennial, companies can use only permanent employees.

"Of late, state governments were allowing companies to use contract workers for such functions as security and canteen services," said LG Electronics India, vice-president (HR), YV Verma.

Now, the labour unions have alleged that companies are using contract workers for permanent and core functions as well, which is against the law.

"Though the law prohibits use of contract labour for perennial work, companies manage to use them extensively for core activities also," said DL Sachdev, national secretary, All-India Trade Union Congress.

The rationale for using more and more contract workers is very strong. To begin with, such workers are paid a fraction of that to regular employees.

In Hero Honda, for example, while contract workers are paid an average salary of Rs 6,500 a month, a permanent worker gets close to Rs 25,000-30,000 a month. Two, in case of an business downswing, such workers can be laid off easily.